Generally, ERP decisions are justified on ‘overall fit’, which is a euphemism for one of the following:
- It scored the most points in our comprehensive evaluation check list.
- It was the consensus decision of our evaluation team.
- We have no real idea, so have gone with a company we trust.
If done thoroughly, the first option is very time consuming so increases the risk that the purchase exercise does not receive sufficient focus and that some quality vendors may choose not to participate.
However, the big issue is that it is virtually impossible to do a useful ‘apples for apples’ comparison of similar ERP’s.
While the check list process is supposed to bring a level of objectivity, in practice, it is a summation of many subjective observations. As a result, while it may rule out clearly unsuitable offerings or identify an obviously superior choice, it doesn’t work well where the differences aren’t clear cut, and it mitigates against the ‘left field’ opportunity.
The second option, has many of the short comings of the first, with the added risk of ending up a compromise that is the least disliked, rather than the optimum choice.
The third option is usually taken because it’s the least time consuming, but in fact, it is likely to give the best result if there’s a reasonable basis to trust the chosen vendor.
The following steps are a systematic approach to achieving this.
- Decide who the one or two key drivers for
change are in the organisation and charge them with selecting the ERP vendor.
- Build a profile of the ideal vendor,
bearing in mind that the issues faced, priorities and the desired outcomes are
what matters, not product features. This should be a ‘living document’ because as
the process proceeds the perception of the ideal may change.
- Make a short list of possible vendors using
personal contacts and/or by identifying who similar organisations to yours deal
with. Then extend this list by, as part of the initial contact with the vendors,
asking who their main competitors are.
- The objective of the initial contact is
to do some preliminary filtering against the required profile. The idea is to get
down to a manageable list, say no more than five. It is also a reality check, so
be transparent as to budget and other expectations.
If a vendor is not interested, then it’s important to establish why not as part of the reality check. Quality vendors will walk away from opportunities if they perceive ‘problems’. These can be an unrealistic budget, poor understanding of requirements, bias in key decision makers or unrealistic expectations.
It’s also possible they may perceive there are alternative options that are more appropriate. Either way, there could be some valuable insights to be gained.
- Compile the initial short list and email
each rejected vendor with the justification and ask if there’s any single compelling
reason why they should be reconsidered. This is done as a courtesy and to identify
possible ‘left field’ opportunities.
- Approach the remaining vendors on the
basis that you are looking for them to help reach the right decision and as
part of that they will need to make a presentation as to why they should get
When they ask about requirements, respond in terms of outcomes not product features. A lot can be learnt from the questions they ask, or perhaps more importantly don’t ask.
Ask for their view of the other vendors and products under consideration and what those vendors might say about them. This helps get clarity as to the market perception of the strengths and weaknesses each vendor.
While some vendors may take the position that they don’t discuss their competitors, this is a little ‘old school’. These days sales consultants see their role as helping potential customers get to the right decision whatever that might be.
However, given that you are tapping into their knowledge for free, it’s incumbent on you to minimise their time input. For example, make it clear their presentation is not a demonstration and so should not need a lot of preparation. As a guide, two hours including discussion should be sufficient for the presentation.
At this point you are going to take them at their word with regards to the product features and their relevance.
- The next step is to shorten up the list
and ask the remaining two or three for ball park pricing. This doesn’t
necessarily dictate choice, but it is done to keep the successful vendor honest.
- Now select the preferred vendor based on
the ideal vendor profile established earlier and advise them that the next step
is for them to ‘sell’ their product to the key employees who will be
responsible for implementing it. This verifies that the product will meet the
needs and secures key employee buy-in through using the vendor’s sales skills.
If the sales pitch doesn’t go well, loop back to the previous step with the second choice and repeat.
- Negotiate the contract.
The benefit of this approach is gaining access to the ERP vendors general knowledge and although this knowledge will inevitability be presented with bias, the assumption is you are well capable of allowing for that.
The process is not hard and fast, and doesn’t work for all situations, for example if price or product features are overriding considerations. However, if you prefer to deal with organisations that are customer as opposed to product focused, then it follows that your purchase process should be focused on the vendor not the product.